Tokio Marine Holdings has announced its participation in the reinsurance program of insurtech firm Lemonade, in what it views as the first step towards a larger strategic partnership.
The company has been a participant in the reinsurance program since July 1st 2020, which was around the same time that Lemonade secured $319 million through its initial public offering (IPO).
Tokio Marine explained that it is planning to increasingly focus on leveraging new technologies to create customer touch points and enhance operational efficiency.
It therefore sees a partnership with Lemonade as a gateway to launching new products and services that will align with the changing behaviours and demands of customers.
At the same time, insurtech partnerships could help large insurers to realign their business models to match a post-COVID marketplace.
Ahead of its IPO, Lemonade stated that reinsurance capital would represent a key tool for the firm as it continues to target growth.
In line with this strategy, it secured a multi-year quota share reinsurance program from July 1st, under which it cedes 75% of its premiums in exchange for a 25% ceding commission.
The agreement is with a panel of seven reinsurers, with three-quarters of these contracts set to run over a three-year term.
“All told, about 55% of our book will be reinsured on a three-year term, with the remainder coming up for renewal and renegotiation on an annual basis,” Lemonade explained.
In addition, Lemonade has non-proportional reinsurance contracts in place with eight reinsurers, in a combination of per risk reinsurance and facultative reinsurance arrangements.
Together with the proportional reinsurance contracts, these non-proportional contracts ensure that the most the firm will pay for any one claim is unlikely to ever exceed $125,000.
